Buying a turnkey investment property is a very straight-forward process, but that doesn’t mean you should let any due diligence slide. Or, if you’re like some and leery about turnkey providers, there are simple things you can do to hopefully make yourself feel better about going forward with a purchase.
I have no idea how long the concept of turnkeys has been around, but I believe it is a concept that has been picking up steam more in the last few years and will most likely continue to be a growing niche. Reason being, people are busy. Not everyone wants to flip a house, or manage a rehab crew, or find motivated sellers, or interview tenants, or take repair calls at midnight. All the while, people do want to move their money out of banks and into something more promising. So what do you do? You buy a turnkey property that you own outright and reap the benefits as you would any other rental property, but yet all the work is done by someone else. The property is fully rehabbed, tenants are already placed, and property managers are standing by waiting to oversee the property once you buy it. Easy. The name says it all- turnkey (or turn-key, or turn key, or any other numerous ways to spell it). The idea is all you have to do is put the key in the door, turn it, and voila! That’s the most work you had to do. I think it is even easier than that though because I’ve yet to have ever even had my hands on a key to any one of my properties.
So as this booming industry keeps booming and more people are getting interested in this concept, how can everyone be sure they aren’t being taken advantage of or getting ripped off or buying a totally bogus investment property? As with anything else, especially real estate investing, education is your biggest safeguard. So allow me to educate you.
One Thing You Need to Understand about Buying a Turnkey
Before I go through the due diligence process of buying a turnkey investment property, you need to understand one simple premise that may seem kind of dumb, but it has meaning. And that is:
You are buying a property. You are not buying into a seller.
Let me explain. All that matters at the end of the day is the property. It doesn’t matter who sold it to you and it certainly doesn’t matter how much they made on the deal. After you close on the property, it’s all you so all that should matter from day one is the returns. You will probably never talk to the seller again (unless you go back to buy another one), so if anything is wrong with the property or there are any problems, the seller will doubtfully be there to pet your head while you cry. Contrary to this idea is that if you don’t like the seller, the seller is a jerk and severely lacking customer service, or even if you looked him up online and he has some kind of felonious past, that doesn’t matter either because all that matters is the property. I bought a turnkey from a company one time who had this real estate agent I just couldn’t stand who not only stunk (like, literally stunk), but he was an outright ass, and often. If I had been in it for the customer service, I would have been out of it without a second blink. I had to remind myself numerous times that I’m not buying into this company or into this agent, I am buying this rockstar rental property and once I close on it, it’s all mine and that’s all that matters. Since then, I’ve met some turnkey providers with amazing properties and deals, only then to find out about past real estate convictions on their records. Do I care? Nope. I’ll find out what the convictions were for, and as soon as I see they aren’t related to their current business I’m usually cool with it. Why? Because all that matters is the property I’m getting.
So now that you know the guy who is about to sell you a turnkey property is a convicted felon and will be nowhere to be found if you need any help after you close, how can you protect yourself against any of this affecting your investment? Simple. Due diligence.
(Okay, way extreme on the worst-case scenario there, and to be totally transparent, most turnkey providers don’t have sketchy backgrounds and even the ones who I know of that do, I love and would still work with any day. I am also referring to no one on BiggerPockets who is associated with turnkeys; the guys I know of who fit this bill have probably never even heard of BiggerPockets. Even better, almost every provider I know will still be in touch after you purchase if you need any help, but understanding that they don’t have to be is important.)
Simple (yet effective) Due Diligence When Buying a Turnkey
There are a few easy things you can do when pursuing a turnkey rental property that will protect you from most worst-case scenarios. Not only are they easy things to do, but they are extremely low-cost to do, if not free. Bonus!